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by orclev
2424 days ago
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It's the corporate structure. The CEO either grows the year over year profits or he gets punished/fired by the board. Boards pick CEOs based on a history of delivering growth at any cost (this is one of the irrational decisions, they should prioritize long term growth over short term, but they rarely do). This in turn provides a strong incentive to CEOs to make bad long term decisions if it means short term gains, because they either won't be around to see the eventual collapse (having moved on to another CEO position) or else they take the long term plan and get fired by the board for not providing enough growth (or worse, reduction). |
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But it shouldn't be a strong incentive, right? Getting fired from a CEO position is fine, you're almost certainly set for life. I understand this is sort of a circular argument, because anyone who doesn't buy into this incentive structure won't be hired as CEO, but my point is that somebody who is willing to go along with this system isn't really behaving rationally in the normal sense of the word.